ATVI

Activision Blizzard, Inc (ATVI)

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Activision Blizzard (ATVI)

Q4 2011 Earnings Call

February 09, 2012 4:30 pm ET

Executives

Kristin Mulvihill Southey - Former Vice President of Investor Relations

Robert A. Kotick - Chief Executive Officer, President and Director

Thomas Tippl - Chief Operating Officer and Chief Financial Officer

Eric Hirshberg - Chief Executive Officer of Publishing Unit

Michael Morhaime - Chief Executive Officer of Blizzard Entertainment and President Blizzard Entertainment

Analysts

Jeetil J. Patel - Deutsche Bank AG, Research Division

Neil A. Doshi - Citigroup Inc, Research Division

Brian J. Pitz - UBS Investment Bank, Research Division

Benjamin A. Schachter - Macquarie Research

Douglas Creutz - Cowen and Company, LLC, Research Division

Brian Karimzad - Goldman Sachs Group Inc., Research Division

Edward S. Williams - BMO Capital Markets U.S.

Presentation

Operator

Good day, and welcome to the Activision Blizzard's Q4 and Calendar Year 2011 Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn today's call over to Ms. Kristin Southey. Please go ahead, ma'am.

Kristin Mulvihill Southey

Good afternoon, and thank you for joining us today for Activision Blizzard's Fourth Quarter 2011 Conference Call. With me today are Bobby Kotick, CEO of Activision Blizzard; Thomas Tippl, COO and CFO of Activision Blizzard; Eric Hirshberg, CEO of Activision Publishing; and Mike Morhaime, CEO of Blizzard Entertainment.

I would like to remind everyone that during this call, we will be making statements that are not historical facts. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. As indicated in the slide that is showing, a number of important factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statement. Such factors include, without limitation, sales levels; increasing concentration of titles; shifts in consumer spending trends; current macroeconomic and industry conditions and conditions within the video game industry; our ability to predict consumer preferences among competing genres and hardware platforms; the seasonal and cyclical nature of our industry; changing business models, including digital delivery of content; competition, including from used games; possible declines in pricing; product returns; price protection; product delays; adoption rate and availability of new hardware and related software; rapid changes in technology and industry standards; litigation and associated costs; protection of proprietary rights; maintenance of key relationships, including the ability to attract, retain and develop key personnel and developers that can create high-quality hit titles; counterparty risk; economic, financial and political conditions and policies; foreign exchange and tax rates; and identification of acquisition opportunities; and potential challenges associated with geographic expansion.

These important factors and other factors that potentially could affect the company's financial results are described in the company's Annual Report on Form 10-K for the period ended December 31, 2010, and in the company's other SEC filings. The company may change its intentions, beliefs or expectations made at any time and without notice, based upon any changes in such factors, in the company's assumptions or otherwise. The company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after today, February 9, 2012, or to reflect the occurrence of unanticipated events.

I'd also like to note that certain numbers we will be presenting today will be made on a non-GAAP basis, excluding the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games; expenses related to share-based compensation; expenses related to the restructuring; the amortization of intangibles, and impairment of intangible assets and goodwill; and the associated tax benefit. Please refer to our earnings release, which is posted at www.activisionblizzard.com for a full GAAP to non-GAAP reconciliation and further explanations.

There's also a PowerPoint overview, which you can access with the webcast, and which will be posted on the website following the call. In addition, we will also post a 12-quarter financial overview highlighting both GAAP and non-GAAP results and along with a summary sheet.

And now I'd like to introduce our CEO, Bobby Kotick.

Robert A. Kotick

Thank you, Kristin, and thank you all for joining us today. 2011 was another record year for Activision Blizzard. In 2011, we generated nearly $1 billion in operating cash flow. And over the last 3 years, we've generated over $3.5 billion in operating cash flow, and we've returned more than $3 billion in value to our shareholders through dividends and stock repurchases.

In the U.S. and Europe, we remain the largest and most profitable third-party interactive entertainment company and the largest and most profitable third-party interactive entertainment digital publisher. We again delivered better-than-expected financial results and achieved multiple financial and operational records, as we have for the last few years. We achieved record operating margins and record EPS, which grew more than 17% over the prior year, and as I mentioned, we generated nearly $1 billion in operating cash flow, which allows us to continue to invest thoughtfully in our future growth and return capital to our shareholders.

With that in mind, we're increasing our dividend 9% to $0.18 per share, and our Board of Directors has authorized a new $1 billion stock repurchase program. Our strong performance is a testament to the hard work and incredible talent of all of the Activision Blizzard employees around the world. Their commitment to excellence, teamwork and inspired creativity continues to drive our superior performance.

Today, we're going to highlight a few important achievements from 2011 and provide some greater detail about our plans for 2012 and beyond, including our strong lineup, our expansion into new markets and new business models, and our development initiatives for new platforms.

Read the rest of this transcript for free on seekingalpha.com